FIN2004 Session 6 - FINANCE FIN2004 Lecture 6 Bond Valuation Valuation Generally Recall in our first lecture finance was described as a discipline

FIN2004 Session 6 - FINANCE FIN2004 Lecture 6 Bond...

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FINANCE FIN2004 Lecture 6: Bond Valuation
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1 Valuation Generally Recall in our first lecture, finance was described as a discipline concerned with determining values and making optimal decisions based on those values. In finance, optimal investment decisions are those which maximize the owner’s wealth. In finance, valuation involves comparing the benefits (the PV of cash inflows) and costs (the PV of cash outflows) associated with a proposed asset or project decision. Assessing an asset’s value today requires discounting its expected future cash flows to the present. We will now apply these principles to value an asset class referred to as bonds
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2 Learning Objectives Recognize the important bond features and bond types Understand bond values and why they fluctuate Understand bond ratings and what they mean Understand the impact of inflation on interest rates Understand the term structure of interest rates and the determinants of bond yields
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